Encouraged by a gusher of oil wealth and rising tourism, Europe’s luxury players are stepping on the gas in the Middle East, opening scores of boutiques in what they describe as one of the world’s most dynamic emerging markets.

“It’s as fast as China,” said Michael Burke, chief executive officer of Fendi, which is posting growth rates of between 30 to 50 percent in the region. “I’m very bullish on it — much more bullish than India.”

“The appetite for luxury has been booming, as we boomed in Russia,” agreed Sidney Toledano, president of Christian Dior, which plans to almost triple its store presence over the next 18 months, including a Jeddah, Saudi Arabia, boutique and a second Dubai location. “We see a very good potential for Dior. [Customers] are brand-conscious and looking for expensive items.”

Sheikh Majed Al-Sabah, president of Kuwait-based Villa Moda Lifestyle and one of the most active fashion figures in the region, said he plans to open more than 40 boutiques this year, including the first Middle East flagships for brands as diverse as Dries Van Noten, Tom Ford, Vivienne Westwood, Issey Miyake and Martin Margiela.

“When you see that oil is reaching $100 a barrel, it is obvious that people, governments, companies and everyone is getting richer. The business is amazing,” Al-Sabah said. “You are talking about an entire region that is still ‘underdeveloped.’ The potential is high since there are many major cities in the Middle East that still do not have any decent retail stores.”

Having seen their business in the region skyrocket 300 percent over the past year, Dutch duo Viktor Horsting and Rolf Snoeren said they expect it to account for one-fifth of their turnover in the near future. Coming this year, in partnership with Villa Moda, are freestanding stores in Kuwait, Bahrain, Qatar and Dubai.

“We’re impressed by the dynamism of the region and the appreciation of beauty and design,” the designers said. “It feels like this is the place in the world where big things are happening at the moment — only in close competition with China. We see a big potential for the business.”

Executives cited a range of factors underscoring their confidence in the region, from a historical appreciation of European luxury goods — right up to haute couture — to a surging swath of wealth beyond the ruling royal families. The region’s growing petro-wealth is driving its companies to increasingly invest abroad — including the Dubai-based Istithmar’s purchase of Barneys New York — further broadening their contacts with the West.

There’s also such a rush of tourists to cities like Dubai that brands such as Fendi must stock fur coats to sell to vacationing Russians. (Rich locals, who need furs for Megève, France, or Gstaad, Switzerland, prefer to buy theirs in Paris or London.) Shireen El Khatib, ceo of the Dubai-based Al Tayer said at the WWD/DNR CEO Summit in October that Russians were the largest group of overseas visitors to the desert nation, accounting for 60 percent of its tourism. They fly into Dubai, stay a week and shop, she said.

Burke noted that Qatar Airways and Emirates are aggressively positioning Qatar and Dubai as new international hubs, which is bound to drive even more tourists and investment to the region.

“The Middle East is exploding,” said Massimo Gasparini, ceo of Missoni, which expects the region to account for up to 7 percent of its sales in five years, up from the current 1.5 percent. “We believe the region has a huge potential. I’m just back from a trip to Dubai where I took a photograph in which you can see at least 50 construction sites. The pace at which this strip is growing is unbelievable.”

“The market potential is huge and growing,” agreed Christophe Caillaud, president of Jean Paul Gaultier, which boasts 11 doors in the region and will add boutiques in Jeddah and Qatar in 2008. “Dubai is becoming a hot tourist destination and all business of the Middle East passes through Dubai. Rich countries like Qatar and Bahrain are opening to Westerners and to high luxury fashion brands, and more people are becoming big spenders.”

Indeed, Dubai has become so expansive and choked with traffic that brands need to open several outlets to capture all the possible clientele — just as they do in shopping capitals such as Paris, Hong Kong or New York. In a sense, the city is much like Las Vegas: Tourists prefer to shop in or near their hotels, and rarely travel to distant stores.

Dolce & Gabbana, which in recent months opened boutiques in Jeddah; Riyadh, Saudi Arabia, and Istanbul, plans to add nine more locations in the region between now and the first half of this year, finding it a prodigious moment to ramp up its presence.

“We have been proficiently working with our local partners for many years until the proper conditions have arisen to strengthen both the business relationship and the presence of our brands in the market through monobrand stores,” said managing director Cristiana Ruella. “We expect further sales expansion in the very near future.”

The Middle East still accounts for less than 10 percent of most brands’ revenues, but executives noted that their boutiques there generate higher profits due to strong sales and low fixed costs in terms of rent, salaries and taxation.

Middle Eastern clients are also big spenders abroad. For example, at Chloé, the Middle East accounts for only 5 percent of its revenues, but 8 percent of its clients in Paris are from the region, on a par with Russians and Chinese, said Ralph Toledano, chairman and ceo.

Chloé’s sales growth in the Middle East is expected to accelerate next year to about 30 percent, and the target is to double sales over the next three years, Toledano said.

“The level of competition varies from one market to another, but we are far from having reached brand saturation,” he said. “Markets like Qatar and Bahrain are only seeing now the development of luxury retail. Even Kuwait and Saudi Arabia need to be developed further.”

Ruella at Dolce & Gabbana noted that today, about 70 percent of the company’s business in the Mideast derives from the Gulf region, but she spies interesting opportunities arising from “minor markets of the area.”

Gucci ceo Mark Lee said competition is particularly high in Dubai and Kuwait, “while in Qatar, Bahrain and Saudi Arabia, the luxury market is somewhat less developed to date.”

Florence-based Gucci opened a flagship in 2006 at Dubai’s Mall of Emirates, “which is performing extremely well,” Lee noted. Coming this year is a full-range store in Qatar and a new, enlarged unit in Bahrain.

Al-Sabah, who in 2006 opened a Villa Moda smack in the middle of a spice market in Damascus, Syria, said he’s logging double-digit growth there and was due to open his third location in the city last month. He said he’s also mulling expansion into Muscat, Oman and Cairo. Unlike other emerging markets, where consumers often need to be educated about brands and fashion trends, Middle East consumers are described as highly fashion aware, demanding the latest styles and accessories.

“They read all the European magazines. They know the hierarchy of brands. They know runway, and they like runway — not pre-collections,” said Burke at Fendi. “It’s similar to Europe in terms of the breakdown between product categories.”

Chloé’s Toledano noted it’s not unusual for clients to come to the company’s boutiques clutching an advertisement or editorial spread and buying the featured item on the spot.

“Our Arab female clients…are fashion-conscious and very receptive and wish to be constantly informed of new arrivals,” said Gianni Castiglioni, ceo of Marni, which is opening five boutiques in the region this year. “The whole area has enormous potential.”

Given that most women wear black abayas, expressive handbags, shoes, jewelry and sunglasses are sought-after product categories, executives noted. As for the men, El Khatib of Al Tayer said they tend to show off their wealth by sporting expensive watches, sunglasses, shoes and mobile phones.

“Leather goods represent the largest category for sales, in line with the rest of the world,” said Gucci’s Lee. “The precious skin handbags and the most expensive and exclusive products of our range are the most appreciated and sought after. We also have a very strong demand for shoes and ready-to-wear.”

Toledano at Chloé cited lusty demand for its special edition Héloïse bag, which comes in gold lambskin or black or silver python.

As for rtw, Gaultier’s Caillaud said designers must offer some body-covering, longer styles in order to reach more conservative areas and build a local clientele.

Climate is a factor, too, given that daytime temperatures in Dubai can soar to 115 degrees. “In all our collections, we feature items made with lightweight fabrics such as muslins,” Marni’s Castiglioni said.

Al-Sabah said customers respond well to styles that are sensitive to local needs. To wit: He’s asked Tom Ford to create local robe-like dishdasha outfits for men, while Van Noten is creating special head coverings, and Jil Sander, a version of the abaya.

In fact, the desire for exclusive, unusual styles is so intense that Villa Moda does not display expensive eveningwear so that women can surprise and make an impact at weddings and other special parties, Al-Sabah said.

Brands in France, which have served Middle Eastern couture clients for years, have a longer history in the region, whereas Italian firms have arrived more recently.

Dior’s Toledano said the house first started by selling couture to Middle Eastern clients, while today they are interested in fine jewelry, luxury leather goods and rtw, also. “They travel to London, Paris, Spain, the South of France, and they know exactly what the luxury offer is outside the Middle East,” he noted.

Still, most brands have only ramped up expansion in recent years. Lanvin, for example, which just opened a boutique in Kuwait, plans to add four more freestanding locations and six shop-in-shops in the Middle East this year. “We will more than double our store presence,” said president Paul Deneve.

Lanvin has sold its men’s wear in the region since the Seventies, but is now experiencing explosive growth with its hot women’s line by Alber Elbaz and a new fashion-driven men’s label Elbaz oversees. “Over the last year we’ve more than doubled, and over the last three years we’ve tripled, so it’s explosive growth,” Deneve said. “We believe we will double again in the next three years in that market.”

Executives agreed that having local partners in the Middle East is essential, not only to navigate authorities and regulations, but to find the most suitable locations and store environments that match local needs and customs.

Gaultier’s Caillaud pointed out that a shopping excursion in a single boutique can last an entire day as most women shop in groups and make it a social outing. “Retail stores have to offer all the comforts, from lounges and chairs, bars and coffee corners to changing rooms big enough to welcome four or five people together,” he explained.

Brands targeting young consumers, including fast-fashion giants, are among the most recent arrivals and, given the demographics — Al-Sabah estimates some 70 percent of the population in the Gulf region is under age 30 — have strong growth potential.

The first See by Chloé boutiques are slated to open next spring in Kuwait and Jeddah, and Toledano said its second line should account for 50 percent of the business in about two years. Four Chloé boutiques are also slated to open in the region next year.

John Hooks, ceo of Giorgio Armani, said that “huge demographic” growth is another factor underscoring the brand’s expansion in the region, which will culminate with the opening of an Armani hotel next year in the world’s tallest building, the Burj Dubai. The hotel is a partnership with local real estate developer Emaar Properties.

“A younger population is a great opportunity for A|X Armani Exchange, and last spring we opened an A|X unit in Beirut [Lebanon] in the wake of openings in Dubai, Abu Dhabi [United Arab Emirates], Jeddah and Riyadh,” Hooks said. “The area has a huge potential for all our lines…and for all our licensed categories.”

Al-Sabah said 80 percent of his business is based on local clients, and in the Gulf region in particular, word of mouth among the right social circles is crucial. What’s more, customer loyalty is built by paying extremely close personal attention, from attending weddings and funerals to visiting sick clients in hospitals, he added.

But, while the region is riding high now, there are some challenges. Chief among them, executives agreed, is finding suitable locations for their stores.

Most retail locations are mall-based, and some house everything from supermarkets to jewelers. As for the possibility of any slowdown, executives said key risks to the region would be a big drop in oil prices or political instability. However, they played down both, with Caillaud noting: “The Middle East community is very united due to religious faith and economic interests, and usually have stable governments.”

Armani’s Hooks agreed, citing a “new generation” that received a more Western education and is competitive and modern. “All in all, I think the Middle East is committed to modernization, to opening up to foreigners and to growing,” he said. “There’s no going back.”

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